From: ahk@chinet.com
Stephen Sprunk wrote:
>On 28-Mar-15 18:39, Adam H. Kerman wrote:
>>Stephen Sprunk wrote:
>>>The house is more interesting. Take the lot's last selling price,
>>>subtract the land value, and what remains must be the
>>>improvements' value.
>>There's a factor for changes to the property to consider to
>>accomodate the house.
>>I suppose if one doesn't wish to use the existing building, or the
>>current building is a wreck due to fire, but it's still desireable to
>>build on the site, once money is spent to clear the site, the value
>>of the vacant site could be higher than the value of the site that
>>requires clearance.
>If the current use is not the highest and best use of the land, then the
>total property value should be less than the land value, to account for
>the cost of clearing the current improvements. IOW, the improvements'
>value would be negative--yet another reason to tax only land value.
Quite so. You've done some reading on this since last we spoke.
>Also, improvements depreciate (absent major remodeling), so they should
>naturally be less and less of the property's value over time, eventually
>turning negative as above.
Hah! Try arguing about the concept of depreciation with the assessor,
and why brand-new homes should be assessed at a higher value... Assessors
typically take the position that it gets fully assessed until something
happens to it that requires a major replacement or it's unusable. I
suppose a homeowner that needs a new roof but can't afford it for a
year could get a one-time reduction, but good luck.
>My jurisdiction gets this wrong, increasing my home's value every year
>but leaving the land value constant--despite a new freeway, major
>commercial developments, etc. nearby that have pushed up the value
>of every property in the city. It isn't worth arguing about, though,
>since the tax is on the total value; if they taxed only my land value,
>I bet they'd get it right.
Assessors like to use automatic inflation factors calculated from
comparable real estate sales. Given that the improvement
tends to be about 2/3 of the real value, and the land 1/3 (simply a
wild-assed guess), if they impose automatic inflation on the 2/3
bit, this tends to result in owners of existing buildings paying
more than their proportionate share of taxes than owners of newer buildings.
>>>(Note that the current vogue is to tax the combined value of land
>>>and improvements, with no distinction. It would be better to tax
>>>just the land value at a higher rate, but AFAIK nobody actually
>>>does that.)
>>Well, various towns in Pennsylvania until recently; Pittsburgh was
>>the largest.
>Ah, okay. I knew there were some in Europe a long time ago, but I
>didn't know there were any in the US. Why did they change?
It's really sad, because Pittsburgh is actual evidence of the transformation
of a post-industrial dump into one of America's nicer medium-sized cities.
The new mayor, about 10 or 15 years ago, was influenced too heavily by land
speculators. There's a good article called something like "How We Lost
Pittsburgh". When I get time later, I'll find you a proper citation.
Part of it is that too many Pittsburgh residents simply forgot (or didn't
live there or were too young to remember) how awful it was in the early
1980s after the local steel industry collapsed and unemployment was actually
worse than Detroit during the auto industry downturn. Pittsburgh never
got as bad as Gary is today, another decrepid post-industrial ex-steel town.
So when the arguments were made that X was partially responsible for the
transformation instead of Y (Y being differential tax on land value),
people went for the mix of taxes that most cities like to impose.
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